Correlation Between Petrovietnam Drilling and Kien Giang

Can any of the company-specific risk be diversified away by investing in both Petrovietnam Drilling and Kien Giang at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Petrovietnam Drilling and Kien Giang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petrovietnam Drilling Mud and Kien Giang Construction, you can compare the effects of market volatilities on Petrovietnam Drilling and Kien Giang and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Petrovietnam Drilling with a short position of Kien Giang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrovietnam Drilling and Kien Giang.

Diversification Opportunities for Petrovietnam Drilling and Kien Giang

0.89

Correlation Coefficient

Petrovietnam Drilling  Kien Giang

Very poor diversification

The 3 months correlation between Petrovietnam and Kien is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Drilling Mud and Kien Giang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kien Giang Construction and Petrovietnam Drilling is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Petrovietnam Drilling Mud are associated (or correlated) with Kien Giang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kien Giang Construction has no effect on the direction of Petrovietnam Drilling i.e., Petrovietnam Drilling and Kien Giang go up and down completely randomly.

Pair Corralation between Petrovietnam Drilling and Kien Giang

Assuming the 90 days trading horizon Petrovietnam Drilling Mud is expected to under-perform the Kien Giang. But the stock apears to be less risky and, when comparing its historical volatility, Petrovietnam Drilling Mud is 1.22 times less risky than Kien Giang. The stock trades about -0.2 of its potential returns per unit of risk. The Kien Giang Construction is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,490,000  in Kien Giang Construction on September 16, 2024 and sell it today you would lose (270,000) from holding Kien Giang Construction or give up 10.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

Petrovietnam Drilling Mud  vs.  Kien Giang Construction

Petrovietnam Drilling Mud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Drilling Mud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kien Giang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kien Giang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Petrovietnam Drilling and Kien Giang

The main advantage of trading using opposite Petrovietnam Drilling and Kien Giang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrovietnam Drilling position performs unexpectedly, Kien Giang can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kien Giang will offset losses from the drop in Kien Giang's long position.

The idea behind Petrovietnam Drilling Mud and Kien Giang Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.